Raising the Bar

1

Raising the Bar:

America’s Challenge to Higher Education

James J. Duderstadt

President Emeritus and

University Professor of Science and Engineering

The University of Michigan

Presidents’ Forum

Center for the Study of Higher and Postsecondary Education

The University of Michigan

January 12, 2007

Introduction

My title, “Raising the Bar: America’s Challenge to Higher Education”, is actually the title Chuck Vest, David Ward, Bob Zemsky, and I proposed for the Final Report of the Secretary of Education’s Commission on the Future of Higher Education in America in an effort to head off the highly negative tone adopted during the early drafting phase by a lynch mob of consultants who tried to take over the Commission process. Here the effort was to set the very positive theme of challenge, by: i) Acknowledging that higher education in the United States was a world leader in many areas; but noting further that ii) a changing nation (demographics) and a changing world (global, knowledge-driven economy) required much more from our colleges and universities.

Actually, this was very consistent with the original charge of Secretary of Education Margaret Spellings, who a year earlier had stated at the first meeting of the Commission: “It is time to launch a national dialogue on our shared vision for higher education. Of course, the circumstances are far different from earlier studies such as A Nation at Risk. Rather than facing a ‘tide of mediocrity’, we’re starting our discussion with the finest system of education in the world–the very best. Our challenge today is to make it even better.” She went on to charge the Commission with addressing four key areas:

• Accessibility: How accessible is higher education? And who will be the college student of tomorrow?
• Affordability: Why is the cost of college rising so rapidly and how can we make college more affordable?
• Accountability: How well are institutions of higher education preparing our students for the workforce of the 21st century? Will our students have the skills to be leaders in the public and private sectors? How do we know what we’re getting for our investment in higher education?
• Quality: How can we ensure America remains the world’s leader in innovation and research?

Unfortunately, the “word-smithers” selected an alternative title for our final report: “A Test of Leadership: Charting the Future of U.S. Higher Education”. But I’ll go ahead and use my preferred title and theme for this talk. I’ll begin with a two-minute drill, reviewing the findings and recommendations of the Spellings Commission and, more important, provide you with a guide on how to interpret it. Then I’ll move on to update you on the status of its implementation. I’ll conclude with my own assessment of what you need to pay attention to, what you can safely ignore, and what we left out.

The Context

In its September 10, 2005, issue, The Economist summarized the status of higher education in America as follows:

“There is no shortage of things to marvel at in America’s higher-education system, from its robustness in the face of external shocks to its overall excellence. However, what particularly stands out is the system’s flexibility and its sheer diversity…It is all too easy to mock American academia. But it is easy to lose sight of the real story: that America has the best system of higher education in the world.”

Yet, while in the broadest sense this is probably true, it simply is not good enough. It is time to raise the bar for the performance of higher education in America.

Today the United States faces a crossroads, as a global knowledge economy demands a new level of knowledge, skills, and abilities on the part of our citizens. We have entered an era in which educated people, the knowledge they produce, and the innovation and entrepreneurial skills they possess have become the keys to economic prosperity, public health, national security, and social well-being. Hence the strength, prosperity, and leadership of a nation in a global knowledge economy will demand highly educated citizenry and hence upon a world-class system of postsecondary education. It will also require leading research universities, capable of discovering new knowledge, developing innovative applications of these discoveries, transferring them into society through entrepreneurial activities, to educate those capable of working at the frontiers of knowledge and the professions.

More generally, it is clear that today the United States must demand and be prepared to sustain a world-class system of postsecondary education capable of meeting the changing educational, research, and service needs of the nation. Yet this goal faces many challenges, including an increasing stratification of access to (and success in) quality higher education based on socioeconomic status, questionable achievement of acceptable student learning outcomes (including critical thinking ability, moral reasoning, communication skills, and quantitative literacy), cost containment and productivity, and the ability of institutions to adapt to changes demanded by the emerging knowledge services economy, globalization, rapidly evolving technologies, an increasingly diverse and aging population, and an evolving marketplace characterized by new needs (e.g., lifelong learning), new providers (e.g., for-profit, cyber, and global universities), and new paradigms (e.g., competency-based educational paradigms, distance learning, open educational resources).

While American research universities continue to provide the nation with global leadership in research, advanced education, and knowledge-intensive services such as health care, technology transfer, and innovation, this leadership is threatened today by rising competition from abroad, by stagnant support of advanced education and research in key strategic areas such as physical science and engineering, and by the complacency and resistance to change of the American research university.

The good news from the Spellings Commission can be simply stated: Whether America’s colleges and universities are measured by their sheer number and variety, by the increasingly open access so many citizens enjoy to their campuses, by their crucial role in advancing the frontiers of knowledge through research discoveries, or by the new forms of teaching and learning that they have pioneered to meet students’ changing needs, these postsecondary institutions have accomplished much of which they and the nation can be proud.

But the bad news is disturbing. Again to quote the Commission’s report: “Despite these achievements, however, the Commission believes U.S. higher education needs to improve in dramatic ways. As we enter the 21st century, it is no slight to the successes of American colleges and universities thus far in our history to note the unfulfilled promise that remains. Our year-long examination of the challenges facing higher education has brought us to the uneasy conclusion that the sector’s past attainments have led our nation to unwarranted complacency about its future.

“We have seen ample evidence that some form of postsecondary instruction is increasingly vital to an individual’s economic security. What we have learned over the last year makes clear that American higher education has become what, in the business world, would be called a mature enterprise: increasingly risk-averse, at times self-satisfied, and unduly expensive. It is an enterprise that has yet to address the fundamental issues of how academic programs and institutions must be transformed to serve the changing educational needs of a knowledge economy. It has yet to successfully confront the impact of globalization, rapidly evolving technologies, an increasingly diverse and aging population, and an evolving marketplace characterized by new needs and new paradigms.”

In summary, the Commission found ample evidence to suggest two areas of particular concern: social justice and global competitiveness:

Social Justice: For close to a century now, access to higher education has been a principal – some would say the principal – means of achieving social mobility. Much of our nation’s inventiveness has been centered in colleges and universities, as has our commitment to a kind of democracy that only an educated and informed citizenry makes possible. Yet today too many Americans just aren’t getting the education that they need – and that they deserve.

Global Competitiveness: The world is becoming tougher, more competitive, less forgiving of wasted resources and squandered opportunities. In tomorrow’s world a nation’s wealth will derive from its capacity to educate, attract, and retain citizens who are to able to work smarter and learn faster – making educational achievement ever more important both for individuals and for society writ large. Yet again numerous recent studies suggest that today’s American college students are not really learning what they need to learn. As Derek Bok summarized it, the education provided today by many of our colleges and universities is “not good enough and getting worse.”

To address these concerns, the Commission set as its goals the following:

1. A world-class higher-education system that creates new knowledge, contributes to economic prosperity and global competitiveness, and empowers citizens.

1. A system that is accessible to all Americans, throughout their lives.

1. Postsecondary institutions capability of providing high-quality instruction while improving their efficiency in order to be more affordable to the students, taxpayers, and donors who sustain them.

1. A higher-education system that gives Americans the workplace skills they need to adapt to a rapidly changing economy.

1. Postsecondary institutions capable of adapting to a world altered by technology, changing demographics and globalization, in which the higher-education landscape includes new providers and new paradigms, from for-profit universities to distance learning.

The Findings of the Spellings Commission

In today’s knowledge-driven society, higher education has never been more important.

America’s national capacity for excellence, innovation and leadership in higher education will be central to our ability to sustain economic growth and social cohesiveness. Our colleges and universities will be a key source of the human and intellectual capital needed to increase workforce productivity and growth. They must also continue to be the major route for new generations of Americans to achieve social mobility. The benefits of higher education are significant both for individuals and for the nation as a whole. Over a lifetime, an individual with a bachelor’s degree will earn an average of $2.1 million – nearly twice as much as a worker with only a high school diploma. Furthermore, the transformation of the world economy increasingly demands a more highly educated workforce with postsecondary skills and credentials. Ninety percent of the fastest-growing jobs in the new information and service economy will require some postsecondary education.

Too few Americans prepare for, participate in, and complete higher education – especially those underserved and nontraditional groups who make up an ever-greater proportion of the population. The nation will rely on these groups as a major source of new workers as demographic shifts in the U.S. population continue.

We found that access to higher education in the United States is unduly limited by the complex interplay of inadequate preparation, lack of information about college opportunities, and persistent financial barriers. While the proportion of high school graduates who immediately enter college has risen in recent decades, unfortunately, it has largely stalled at around 60 percent since the late 1990s.The national rate of college completion has also remained largely stagnant. Most important, and most worrisome, too many Americans who could benefit from postsecondary education do not continue their studies at all, whether as conventional undergraduates or as adult learners furthering their workplace skills. While there are important actions that can be taken both by colleges and universities and by their patrons (state and federal government, private support) to improve access at the margin, major gains are not likely without a sustained improvement in secondary education. Dismal high school achievement rates nationwide have barely budged in the last decade. Close to twenty-five percent of all students in public high schools do not graduate– a proportion that rises among low income, rural, and minority students.

We are especially troubled by gaps in college access for low-income Americans and ethnic and racial minorities. Notwithstanding our nation’s egalitarian principles, there is ample evidence that qualified young people from families of modest means are far less likely to go to college than their affluent peers with similar qualifications.

Only 8% of the bottom quartile will graduate from a four-year institution, compared to 75% of the top quartile. To quote Chuck Vest: “In American higher education today it is better to be dumb and rich than to be smart and poor.” Shortly after our report, the Education Trust, headed by Commissioner Kati Haycock, released a scathing report labeling flagship public research universities as “Engines of Inequality” by “choking off college access and upward mobility for the poor by shifting away from the traditional need-based financial aid to merit-based programs that heavily favor affluent students, thereby abandoning their historical role as engines of social mobility through providing educational opportunities to students from low-income and minority populations.” (The words were taken from a NYT editorial condemning this practice.) Nearly 40 percent of today’s postsecondary students are self-supported; more than half attend school part-time; almost one-third work full-time; 27 percent have children themselves. But we are not expanding capacity across higher education to meet this demand. Just as dismaying, low-income high school graduates in the top quartile on standardized tests attend college at the same rate as high-income high school graduates in the bottom quartile on the same tests.Only 21 percent of college-qualified low-income students complete bachelor’s degrees, compared with 62 percent of high-income students.

Our higher-education financing system is increasingly dysfunctional. State subsidies are declining; tuition is rising; and cost per student is increasing faster than inflation or family income. Affordability is directly affected by a financing system that provides limited incentives for colleges and universities to take aggressive steps to improve institutional efficiency and productivity. Public concern about rising costs may ultimately contribute to the erosion of public confidence in higher education.

There is no issue that worries the American public more about higher education than the soaring cost of attending college. Yet because students and families only pay a portion of the actual cost of higher education, affordability is also an important public policy concern for those who are asked to fund colleges and universities, notably federal and state taxpayers, but also private donors. The rapid increase in the price of a college education, driven in part by cost shifting from tax support to tuition in public institutions, by inefficiency and stagnant productivity gains, and by unbridled competition for the best students, faculty, resources, and reputations, is undermining public confidence in higher education. From 1995 to 2005, average tuition and fees at private four-year colleges and universities rose 36 percent after adjusting for inflation. Over the same period, average tuition and fees rose 51 percent at public four-year institutions and 30 percent at community colleges.

One of the reasons tuition and fees have increased is that state funding has fallen to a 25 year low, dropping to less than 20% of the operating costs of the nation’s public colleges and universities, on the average. Although we strongly encourage states to continue their historic and necessary commitment to the support of public higher education, this may be difficult in view of the priorities of an aging baby boomer population which will emphasize health care, retirement, safety from crime, and tax relief rather than education for their tax dollars. The bottom line is that state funding for higher education will not grow enough to support enrollment demand without higher education addressing issues of efficiency, productivity, transparency, and accountability clearly and successfully.

College and university finances are complex, and are made more so by accounting habits that confuse costs with revenues and obscure production costs. The lack of transparency in financing is not just a problem of public communication or metrics. It reflects a deeper problem: inadequate attention to cost measurement and cost management within institutions. Next to institutional financial aid, the greatest growth has been in administrative costs for improvements in student services. A significant obstacle to better cost controls is the fact that a large share of the cost of higher education is subsidized by public funds (local, state and federal) and by private contributions. These third-party payments tend to insulate what economists would call producers – colleges and universities – from the consequences of their own spending decisions, while consumers – students – also lack incentives to make decisions based on their own limited resources. In addition, colleges and universities have few incentives to contain costs because prestige is often measured by resources, and managers who hold down spending risk losing their academic reputations. Another little-recognized source of cost increases is excessive state and federal regulation. Specifically, institutions of higher education must comply with more than 200 federal laws – everything from export administration regulations to the Financial Services Modernization Act.